Dollar holds gains before U.S. retail sales data

Bernanke signaled buying won't end soon

The dollar held gains against the yen and euro from the end of last week before U.S. data on retail sales today that may add to the case for the Federal Reserve to reduce monetary stimulus.

The Bloomberg Dollar Index last week posted its first drop in a month after Fed Chairman Ben S. Bernanke signaled that bond buying won’t be dialed back soon. He is scheduled to speak on monetary policy this week. The Australian dollar strengthened against all of its 16 major peers after data showed China’s economy expanded in the second quarter.

“The U.S. economy looks to be on a recovering trend,” said Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd. “The trend, we think, is for a stronger U.S. dollar given our expectation that tapering will come in this year.”

The dollar was little changed at 99.25 yen as of 10:12 a.m. in Singapore following a 0.3 percent advance on July 12. It was at $1.3063 per euro after rising 0.2 percent to $1.3067 at the end of last week. The European currency was unchanged at 129.66 yen. Financialmarkets in Japan are closed today for a national holiday.

The Fed buys $85 billion of Treasuries and mortgage debt each month as part of its quantitative-easing program to cap borrowing costs, which tends to devalue the U.S. currency. Bernanke on July 10 damped speculation that the Fed would slow its bond-buying program.

“Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy,” he said that day. The Fed chairman will deliver a semi-annual monetary policy report to Congress on July 17.

Retail Sales

The Bloomberg Dollar Index, which tracks the greenback against 10 other major currencies, was little changed at 1,037.31. It lost 1.6 percent last week, the biggest slide since June 7.

The U.S. Commerce Department is likely to say today that retail sales rose 0.8 percent in June, according to the median estimate of economists surveyed by Bloomberg News. It would be the fastest gain since February.

Futures traders raised their bets that the dollar will strengthen against the yen, figures from the Washington-based Commodity Futures Trading Commission show. Wagers by hedge funds and other large speculators on a gain in the greenback outnumbered those on a decline by 80,305 on July 9, the most since June 4. That compared with so-called net longs of 70,736 a week earlier.

The Aussie jumped 0.5 percent to 90.95 U.S. cents today after a 1.5 percent decline on July 12 that was the biggest drop since June 19. The currency’s 14-day relative-strength index fell to 35 at the end of last week, nearing the 30 level that traders view as a signal that an asset’s price has fallen too fast.

China’s economy, the world’s second biggest, grew 7.5 percent in the second quarter, the National Bureau of Statistics said in Beijing today, matching the median estimate of economists in a Bloomberg poll. Industrial production expanded 8.9 percent in June from a year earlier, while retail sales rose 13.3 percent last month.